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FPC may move to cool mortage market despite latest BBA data

UK mortgage approvals for home purchases hit an eight-month low in April of 42,173, after a reading of 45.045 the month before, according to the British Bankers' Association (BBA).

The consensus estimate had been for a reading of 45,100.

The previous month's estimate was revised lower from a preliminary reading of 45,933.

At least for the time being the new regulations introduced under the Mortgage Market Review (MMR), on April 26th, would seem to have temporarily taken some of the steam out of housing market activity as some lenders moved to raise their mortgage lending standards before it kicked in.

Even so, robust increases in the prices of homes are still "more likely than not" over the coming months, as a result of robust underlying interest from buyers and given the limited supply of housing in many areas, Dr. Howard Archer at IHS Global Insight explained to clients in a note on Tuesday morning.

The think-tank was forecasting house prices to gain by around 8-9% in 2014 and a further 7% in 2015.

While the strength of house prices outside of London was not yet a risk the Financial Policy Committee could very well take further steps to rein in the market as soon as its June meeting, Archer wrote.

With a view to making sure that banks only lend to those who can afford their mortgages those measures may include: recommending that banks hold higher levels of capital, limiting maximum loan-to-value ratios for mortgages and recommending to the government that it dilute its Help-to-Buy mortgage guarantee scheme.

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